Monday, January 25, 1999

By Craig T. Kojima, Star-Bulletin
Gov. Ben Cayetano said today that “by the next legislative
session -- one year from now -- we will present our proposed
reforms for your consideration and approval” on revamping
the state’s civil service system.

civil service

The governor brands the
system as 'obsolete' in his
State of the State speech
and plans to change it

Full text of Cayetano's speech

By Mike Yuen


In his State of the State speech, Gov. Ben Cayetano today retread familiar, failed proposals from last year's economic revitalization road map. But he also detoured into an uncharted area: Dismantling by June 30, 2000, the state's civil service system, which he branded as "obsolete."

Art It's a problematic territory for which he doesn't yet have a solution, Cayetano said, but he has instructed Personnel Director Mike McCartney to devise a plan to modernize the system.

"By the next legislative session -- one year from now -- we will present our proposed reforms for your consideration and approval," Cayetano told state lawmakers.

"This is not about layoffs -- it's about change, it's empowering state employees and trusting them to do what's right."

Cayetano said that during his first term in office, he came to the conclusion that Hawaii's 60-year-old civil service system, with nearly 1,700 job classifications, is "rigid, inflexible -- unable to make timely responses to public needs.

The system stifles employees who are innovative, hard-working and who want to do a good job."

The new civil service he envisions will encourage innovation, reward hard work and adapts to constant change, Cayetano said.

Unlike his fellow Democrats who control the House, Cayetano is not proposing that a task force be established to review civil service and collective bargaining and make recommendations for next year's Legislature to consider.

"But I assure you," Cayetano said, "we will invite all stakeholders -- state workers, labor unions, business and the public -- to join us in this effort."

By Craig T. Kojima, Star-Bulletin
Gov. Ben Cayetano, flnaked by Lt. Gov. Mazie
Hirono and Senate President Norman Mizuguchi,
said during today's State of the State address that he
intends to change the state's civil service system.

On economic revitalization, Cayetano pointed to one of his successes from last year's legislative session -- a $750 million reduction in personal income taxes over four years -- and said he wants to maintain the momentum for signaling that Hawaii does welcome business development.

With that in mind, he proposed a 50 percent reduction in corporate and franchise tax rates and the exemption of exported services from the 4 percent general excise tax. Both initiatives were recommended by Cayetano's economic revitalization task force.

Even in Cayetano's push for government efficiency and better education for isle children, the influence of the economic revitalization task force was evident.

His goal that government regulations be slashed by 40 percent during his final four years in office, under an effort led by Lt. Gov. Mazie Hirono, echoes the task force's insistence that improvements be made in the regulatory process.

Cayetano's proposal to use the yet-to-be-built Kapolei Middle and High schools for a pilot program for nearly autonomous "new century schools" also has elements of the task force's urgings that individual schools be empowered to meet their community, students and faculty needs. The task force also saw an educated work force as a key to a flourishing isle economy.

"Simply throwing money at our schools will not improve them," Cayetano said. "We can provide a computer for every child, teach the child how to become computer literate. But if we don't teach the child how to think, how to solve problems, then we would have failed."

Critical thinking is best taught in an environment of academic freedom, where schools can be innovative without fear of failure, Cayetano said.

New century schools, he added, will be free to create and control their curricula and budgets without interference from the Board of Education and the Department of Education. They would also have operational freedom to select faculty without the constraints of existing collective bargaining contracts -- and even to decide if they want to negotiate their own contracts or not have collective bargaining at all.

Cayetano today did not mention his proposal to further reduce the state personal income tax by lowering the the top bracket, now at 8.75 percent, to 7.25 percent in 2002 with corresponding decreases in other income brackets. The initiative, which would have meant a loss of $200 million to $250 million annually to the state treasury, has received a chilly response from key legislators, who wondered how the state would cover the income-tax losses.

Instead, Cayetano told lawmakers he is proposing a reduction in the state personal income tax that would be triggered if state revenues reached a certain level. He provided no details.

Also without specifics, Cayetano proposed a long-term health care tax deduction for individuals and family members.

Cayetano added he also wants employers to get a double deduction for their costs for prepaid healthcare insurance.

When the Legislature convened last week, Senate President Norman Mizuguchi (D, Aiea) recommended that the state offer tax credits to offset the cost of half of the annual premiums up to a specified limit.

And like House Speaker Calvin Say (D, Palolo), Cayetano proposed aid for hotels, a key sector of the tourism industry, which drives Hawaii's economy. Cayetano would simply extend his hotel renovation tax credit -- a 4 percent credit that could not be more than 10 percent of the hotel room tax that a hotelier paid the previous year.

Say had suggested a dollar-for-dollar tax credit for hotel room renovation projects with a price tag of $1 million or more.

When the tobacco industry's settlement with the state is finalized, Cayetano said, he wants the $1.13 billion -- to come over 25 years starting next year -- to establish two trust funds. One fund would support anti-smoking initiatives and expanded children's health programs; the another would be a rainy day fund to help ease the pain of emergencies or rough economic times.

Cayetano did not dwell on emotionally charged measures that he will be putting before lawmakers. They include allowing physician-assisted death and establishing domestic partnerships for gay and lesbian couples that would give the financial benefits of marriage but not the title of marriage.

"The fact that I haven't discussed them today does not mean they are not important. Nor that we abandoned them," Cayetano said.

"While these social issues will surely draw controversy, we believe they are important and should be debated," he added.


Key points

Highlights from Gov. Ben Cayetano's State of the State address today:

Tax reform and incentives

bullet 50 percent cut in corporate and franchise tax rates.

bullet Exempt exported services from the 4 percent general excise tax.

bullet Grant a double deduction for employer costs for prepaid health care insurance.

bullet Grant a research and development income tax credit for selected new industries.

bullet Offer a five-year tax holiday for high-tech companies that locate in the high-technology park envisioned for Kakaako.

bullet Extend the hotel renovation tax credit.

bullet Allow a reduction in the state personal income tax that would be triggered if revenues reach a certain level.

bullet Offer a long-term care tax deduction for individuals and family members.

Government efficiency

bullet Abolish an "obsolete" civil service system by June 30, 2000. A year from now, the administration's personnel director, Mike McCartney, is to have a reform plan for lawmakers' consideration.

bullet Slash government regulations by 40 percent over the next four years with a special team headed by Lt. Gov. Mazie Hirono.

bullet Give departments more flexibility in running their operations, as Cayetano asked lawmakers not to micromanage government operations.

Tobacco settlement

bullet Use the $1.13 billion settlement that will be paid over 25 years beginning in 2000 to establish two trust funds -- one to support anti-smoking initiatives and expanded children's health programs; another for a rainy day fund for fiscal emergencies.


bullet Have each public school set achievement goals that measure performance against its own history -- not other schools'. If achievement is inadequate, personnel changes may occur.

bullet Establish a pilot program for "new century schools" at the yet-to-be-built Kapolei Middle and High schools. They would be exempt from the state procurement code, have budgeting and hiring freedom and the ability to negotiate their own collective-bargaining contracts or none at all. The schools would be guided by a panel of faculty, parents and community leaders.

bullet Give school administrators more authority and flexibility in disciplining unruly students.

bullet Establish alternative schools that may be privatized for students expelled from the statewide public school system.

bullet Allow high school students to take technical courses at community colleges, and have those courses count toward their graduation.

bullet Establish a work-force training program in healthcare, biotechnology, high tech, telecommunications and environmental sciences.

University of Hawaii

bullet Convene a meeting of leaders of all isle universities -- public and private -- to develop a strategy to market Hawaii as the education center of the Pacific.


bullet Have a portion of the hotel room tax earmarked to protect and preserve Hawaii's natural resources.


bullet Will establish, by executive order, a millennium commission to plan a year-long celebration that is hoped to attract an additional 500,000 visitors in the year 2000.


Full text of Cayetano's speech

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